Canadian real estate is back on its way to becoming more unaffordable. RBC Economics’ latest report shows affordability got worse in Q3 2020. Temporary government transfers had improved the measure when observed in aggregate. However, as those transfers are gradually reduced, affordability is once again deteriorating. This isn’t a big city thing either. All major markets, with one exception, saw a deterioration in affordability.
Canadian Affordability Improved Due To Government Transfers
RBC notes rising prices and falling incomes have been offset by government transfers. The bank’s economists observed household incomes increased 11% in the second quarter. However, this was due to government transfers outpacing the lost income, and temporarily inflating household income. As income supports faded in Q3, the banks observed income fell 3.1% from the previous quarter. They “expect a further dialing down of transfers” as the pandemic slows. This is counter intuitive. Aggregate income levels are likely to fall as things improve.
The Median Household Needs To Spend 49% of Income On Ownership Costs
Canadian housing affordability worsened in the past quarter, as those government measures were reduced. The bank estimates the median household would have to spend 49.1% of income to carry ownership costs in Q3. This is up from 47.8% in the previous quarter, but still down sharply from the almost 30 year high in March. It appears to be an improvement, but may actually end up much worse after the pandemic. Affordability is already rolling back as prices increase, and government transfers are reduced.
RBC Housing Affordabilty IndexThe percent of household income the median Canadian household would need to spend on ownership costs. Source: RBC Economics. Better Dwelling.
Only Toronto Condos Saw An Improvement In Affordability
Almost every market, across all segments of housing saw affordability deteriorate – except one. Across Canada, single-family homes saw the percent of income a median household would need for payment, rise 1.4% from the previous quarter. Condo apartments saw a smaller, but still very large, 0.4% increase over the same period. The only market to see an improvement in affordability was Greater Toronto.
RBC Housing Affordabilty Index By MarketThe change in percent of household income the median Canadian household would need to spend on ownership costs. Source: RBC Economics. Better Dwelling.
Greater Toronto real estate saw affordability deteriorate at a lower level than the rest of the country. Single-family homes saw ownership costs rise 0.9% in Q3 for the median household income. Condo apartments actually made a drop of 0.3% over the same period, for the same segment. Yup, that’s it. Toronto condos were the only segment to see affordability improve across the whole country.
The bank’s economists expect government transfers to unwind gradually, and with it affordability to deteriorate further. They also add, falling mortgage rates may provide a partial offset, but it may not help across the board. Already stretched markets like Toronto and Vancouver are vulnerable to any further erosion of affordability.
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Biden plans to expand the H1-B, and its inclusion. Keep in mind Canadians are also foreign workers being attracted by this administration.
Canadians are lazy. They’re going to push and vote for governments that will give them CERB forever, and inflate the value of their home they bought in the 90s. Free money and it’s enough to carry their mortgage that cost nothing when they got it.
How to get 10 things completely wrong in 3 sentences.
Keep in mind that nearly zero US companies will give a Canadian an H1-B as you can freely TN them across the border and use your H1-B caps for other international.
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